Authors : Somaiya Islam and Faria Nowshin.
Foreign investors often choose to operate or invest in Bangladesh through Joint Ventures, Consortiums, or Associations (hereinafter referred to as “JVCA”) with local partners. Recognizing the increasing role of such arrangements in development projects and commercial undertakings, the Foreign Exchange Investment Department (FEID) of Bangladesh Bank, by Circular No. 02 dated 20 November 2024, has issued the “Guidelines for Operations of Business in Bangladesh by Joint Ventures/Consortiums/Associations (JVCA) Having Foreign Partner(s)”. Issued under section 18B(1) of the Foreign Exchange Regulation Act, 1947 (FERA) and in alignment with the Guidelines for Foreign Exchange Transactions, 2018 (GFET), the circular sets out mandatory compliance obligations for non-residents, resident foreign nationals, and foreign companies not incorporated in Bangladesh that seek to establish a branch, liaison, representative office, or other place of business in the country.
The guidelines respond to diverse practices by JVCAs involved in Government of Bangladesh development projects, covering reporting, cross-border transactions, audited financials, dealings with branch offices, profit remittances, tax payments, and returns. To ensure transparency and accountability, Bangladesh Bank directs Authorized Dealers (ADs) to enforce these rules and guide their JVCA clients in compliance.
Establishment and Reporting
Under the new Guidelines, JVCAs with non-resident partners are required to obtain prior permission from the Bangladesh Investment Development Authority (BIDA) or other competent authorities, as applicable. A valid contract duly executed among the JVCA partners must be in place, and the entity is required to notify Foreign Exchange Investment Department (FEID) of Bangladesh Bank through its Authorized Dealer (AD) within 30 days of such approval. The scope of activities is strictly limited to those specifies in the BIDA approval letter. Each JVCA is also required to secure TIN, BIN, and VAT registration and ensure timely filing of tax returns.
Banking Transactions
Every JVCA must maintain a bank account with a nominated AD branch, in whose favour the work order has been awarded. All inward and outward remittances, including payments abroad and receipts from abroad, must be reported to Bangladesh Bank through this nominated AD. While local currency accounts may be opened with other banks subject to No Objection Certificate (NOC) from the nominated AD and compliance with KYC and AML/CFT standards, all local account changes (opening, closure, dormant) must be notified to FEID and the concerned office of Bangladesh Bank through the nominated AD, and all work order payments must be credited to the JVCA’s account.
Where projects are funded by foreign or international agencies, foreign currency accounts may be opened without prior approval from Bangladesh Bank, subject to the approved contract terms. Such accounts must be reported under Statement S-13 and closed once the project is completed. Bank accounts abroad are permissible only with prior approval from the FEID, and inward remittance through partner branch offices is strictly prohibited. All deposit accounts of JVCAs maintained with nominated AD must remain non-interest bearing. At project completion, the nominated AD must close all accounts and notify FEID with the required documentation.
Financial Statements and Documentation
The circular requires the preparation of separate audited financial statements in compliance with Bangladesh Financial Reporting Standards (BFRS) and the regulations of the Financial Reporting Council (FRC). Each financial statement must include a Document Verification Code (DVC). All income from local sources must be recorded, regardless of whether it is credited in Bangladesh or abroad. The guidelines prohibit offsetting assets and liabilities, disallow adjustments under “Capital and Partners’ Contributions” except in cash, and require retained earnings to be separately presented in the Balance Sheet.
Loans
Borrowing by JVCAs from resident entities must be in accordance with GFET provisions. Partner branch offices in Bangladesh may provide loans if adequate surplus funds are available, subject to FEID approval. Trade and commercial credits may be given under normal business norms, with both cases requiring related-party disclosure. Interest-free working capital loans may also be extended by partners from their head offices, provided these are reported post facto to the FEID through the AD.
Outward Remittance
The repatriation of profits payable to foreign partners requires prior approval from Bangladesh Bank with the nominated AD submitting application to FEID with the documents listed in Annexure-A. No profit remittance or lending can be made to a branch office in Bangladesh of the foreign partner without prior approval. Payments relating to royalties, fees for technical know-how, technical assistance, or franchise fees must comply with BIDA’s circular dated March 3, 2021, and subsequent FE Circular Letter No. 07 dated April 11, 2021. Any outward remittance not explicitly covered under GFET, the Import Policy Order, or BIDA guidelines requires approval from the FEID. Repatriation of residual amounts and borrowings from the head offices of foreign partners also requires prior approval from Bangladesh Bank, along with application of Nominated AD to FEID and supporting documents set out in Annexure-B.
Other Compliance Requirements
The circular adds further obligations, including documentation of machinery imported as capital without payment under the Import Policy Order. Imports of machinery as capital without local payment must comply with the IPO, and ADs must retain all documents, including Bill of Entry. AD banks must verify BIDA-issued (or other authority) work permits of foreign nationals before making payments, and such salaries/benefits must be disclosed in audited accounts. JVCAs must also comply with the Workers’ Profit Participation Fund (WPPF) under the Labour Act, 2006, where applicable. Both the nominated AD and the JVCA must follow any further instructions from Bangladesh Bank.
Documents for Profit Repatriation (Annexure-A)
- Copy of Joint Venture Agreement
- Audited Financial Statements for the relevant period
- Board resolution declaring profit, certified by auditor
- Auditor-certified calculation of remittable amount
- Encashment certificates/other proof of foreign partner’s capital contribution
- Auditor’s certificate confirming:
- ->correct tax calculation on profit
- ->sufficient provision for all past and present tax liabilities
- Final income tax assessment order
- Undertaking to return any ineligible remittance if required by Bangladesh Bank/AD
- Bank statement of last 1 year
- Any other document(s) specified by Bangladesh Bank at approval stage
Documents for Repatriation of Residual Amount / Borrowings (Annexure-B)
- Approval letter from authorities for office closure in Bangladesh
- Project Completion Certificate from employer
- Waiver approval of any restrictions on outward remittance (if applicable)
- Resolution on decision to close office
- Audited Financial Statements for last 3 years
- Auditor’s certificate confirming:
- ->calculation of remittable amount and asset disposal
- ->all liabilities in Bangladesh (incl. gratuity/benefits) are settled or provided for
- ->no un-repatriated foreign income remains
- Income tax clearance certificate
- Applicant’s confirmation of no pending court cases or legal impediment
- Work permit cancellation & tax clearance of foreign expatriates (if any)
- Encashment certificates for funds received from abroad
- Public notice of office closure
- Proof of final office rent settlement
- Bank statement for last 1 year
- CIB certificate if any local loan was availed
- Awards/Bills from employer/work order giver
- Approval letter for borrowing from Head Office abroad (if applicable)
- Any other documents required by Bangladesh Bank
Through this framework, Bangladesh Bank has introduced a comprehensive compliance regime for JVCAs with foreign partners. It emphasizes formal establishment and reporting, regulated banking transactions, transparent audited accounts, controlled borrowing, and carefully supervised profit remittances. The circular ensures accountability and alignment with national financial regulations, while also laying down requirements for documentation and compliance.
